Global steel prices show mixed trend in Aug. Know why?

• China determined HRC price direction
  
  
• Longs pressured by lack of demand, supply glut
  
  
• Raw materials keep finished prices supported
  
  

Morning Brief: Global steel prices showed a mixed trend in August 2023. While hot rolled coils (HRCs), in particular, remained mainly range-bound, longs lost ground, reveals data maintained with SteelMint.

In HRCs, China's offers rose just $4/t m-o-m to $566/tonne (t). India's quotes upped a mere $2/t to 572/t. Russia's actually fell $9/t to $566/t but Japan's rose a sharp $17/t to 592/t.

Turkiye's rebar offers slipped 3% in August to $572/t (against $589/t in July) while Black Sea billets dropped 4.45% to $450/t ($471/t).

All prices are on FOB basis.

Factors that impacted global steel prices in August

China sets price direction: Although the market witnessed volatility, HRC prices remained stable, especially from the largest exporter, China, as well as from India.

China was the dominant player in the HRC export market and sold substantially in the Middle East and North Africa and a moderate amount in Southeast Asia and Latin America. With its own domestic demand subdued and the government yet to officially announce any production cut measures, output was up 2.5% over January-July. Hence, China kept offers range-bound to retain its hold on overseas sales. That apart, domestic mills in Vietnam, a key Chinese market, lowered HRC prices m-o-m by $15/t CIF mid-August, which further pressured Chinese offers.

Where Japan was concerned, there were no firm offers as domestically the country experienced demand. Major fabricators had a considerable backlog of orders, and "prices are likely to remain resilient, mainly for large-scale projects, from autumn onward," a source informed, adding, inventories of both thin and thick steel plates decreased, and further improvement in supply and demand is expected. Secondly, Japan's steel exports rose 12% in July, marking the first increase in two months and the first double-digit growth since December 2021. Japan's crude steel output is also expected to increase almost 2% in the July-September quarter.

Indian offers remained flat amid minimal buying interest while domestic demand was quite decent. The Vietnamese and MENA markets had moved away to China while European Union end-users remained closed for summer maintenance.

Russian HRC offers fell mainly because of the eroding rouble, which recently plunged to a 16-month low against the dollar since the war erupted in February 2022.

Longs demand weak globally: The story in longs was, however, bleak globally, pulling down items across the board - billets, rebar, wire rods etc. There was a supply glut amid low demand. A crop of new players is in the market - Algeria, Egypt, the UAE and Saudi Arabia - with aggressively low quotes. In China, with the property market struggling and no clear-cut announcements on production, the market was highly uncertain, pulling down rebar futures for October delivery. Buyers moved to the sidelines while construction did need-based purchasing.

A lot of billet and rebar sellers from Southeast Asia and non-traditional sources like Algeria and Egypt have been jostling for space, pressuring down prices.

Turkiye, a key longs seller, has been badly hit by sanctions on Russia. It buys semis from the Black Sea region, makes rebars to sell to the EU and the US. However, fresh western sanctions demand that no input material can be sourced from Russia, putting Turkiye in a bind.

Russian longs producers, on their part, even if they do not have global takers, are busy servicing their domestic market as the country sees a construction upsurge.

Against such a global backdrop, Japan's top EAF steelmaker, Tokyo Steel, rolled over its HRC and rebar prices for September sales.

Raw material prices supportive: Apart from coking coal, most raw material prices remained supportive m-o-m. Iron ore fines, CFR China, actually dropped by $3/t to $109/t, which also allowed a marginal price fall in some products, as already mentioned above.

Coking coal's August prices rose almost 9% to $267/t CFR India. Limited availability of spot cargoes and a booking spree from a key end-user country like India -- which braces for a demand upturn in the post-monsoon third quarter (October-December) - are factors impelling the uptrend.

Scrap prices were stable at $363/t CFR Turkiye. Prices went down earlier in the month but recovered when Turkiye returned to "buy" mode. That apart, India, Bangladesh and even Pakistan showed some interest towards the month-end. These factors helped to average out the prices. But scrap looked flat also because of lack of global demand for steel.

Outlook

Iron ore prices are firming up on hunches that steel demand would pick up September onwards, especially in China and India. However, longs demand globally is not expected to pick up anytime soon considering the macro indicators of inflation, currency erosion and lack of demand.